Double Taxation Avoidance Treaties in Ethiopia: A Content Analysis

Abstract

 Focusing on Ethiopian double taxation avoidance agreements, this article analyses the double taxation treaties Ethiopia has signed with 20 countries. Ethiopia, in most cases, is a source country for international and foreign direct investments. By examining key provisions in these treaties, inter alia, the permanent establishment (PE), business income, independent service, teachers, professors and researchers, professional services, royalties, dividends and interests, and eliminating double taxation provisions, this article shows that the Ethiopian tax agreements lack uniformity, regardless of the status of the country: whether developed or developing member of OECD and non-OECD. The article also shows the provisions of the tax treaties which are, mostly, below the standards adopted in the UN model-favoring developing countries which usually are the source countries. In most of the agreements, narrow conception of PE, narrow base of business income, incorporation of the ‘limited force of attraction’ principle by few agreements, and limited taxing rights on incomes sourced in Ethiopia are evident. In addition, most of the tax treaties were signed at a time when Ethiopia had no income tax laws which encompass detailed international taxation provisions. As a typical evidence, the old income tax proclamation, i.e. the negotiation base of the current active tax treaties, did not have a broadened provisions of PE conceptualization, services PE, supervisory activities, time period for the establishment of PE, and exploration of natural resources in it.